How Tesla's Market Value Skyrocketed

Our charts show why Tesla's influence in the marketplace is growing

Lauren Solberg 17 November, 2021 | 11:13AM
Facebook Twitter LinkedIn

Tesla models

Love it, hate it, or haven’t thought much about it, Tesla (TSLA) is now a stock that investors can’t ignore.

Over the past two years, Tesla’s market value has skyrocketed. The electric-vehicle manufacturer is now the fifth largest stock in the United States, up from $752 billion at the beginning of the year and $117 billion in January 2020, when it was the 64th largest stock. The 18-year-old company, which went public in 2010, now has a market value that exceeds Warren Buffett’s Berkshire Hathaway (BRK.B), Johnson & Johnson (JNJ), and Home Depot (HD).

With such high market valuation comes a heavy weight in many of the indexes that track the US stock market and, therefore, in most investors' mutual fund portfolios. So, when Tesla posts big moves, investors can feel it.

Take the day in late October when Tesla’s market value surged after an announcement of a partnership with Hertz (HTZ) to build up its electric-vehicle fleet. That day, Tesla shares jumped 12%--contributing almost half that day’s 0.49% rise in the Morningstar U.S. Large-Mid Index, according to Morningstar Direct. And the following week, Tesla shares fell 12% after Elon Musk tweeted about his decision to sell 10% of his stake in the company. That day, the market lost 0.3%. Tesla’s move helped explain a 0.26 percentage point of that drop.

These numbers might seem small but can add up over time. Over the last two years, the Large-Mid Index, an index that essentially tracks 90% of the stock market, has risen 58.95%. But if Tesla’s performance is excluded, the index would be up 56.39%, according to Morningstar Direct.

This kind of impact comes as Tesla stock has once again rocketed higher after taking a pause in the early part of 2021. Shares are up 37.1% so far in the fourth quarter compared with gains of 8.0% for the broader market. Tesla has returned over 1,360% over the past three years, defying sceptics, sparking debate, and contributing to the investor frenzy around other electric-vehicle manufacturers.

As a result of this incredible run, Tesla currently comprises 2.08% of the Morningstar U.S. Large-Mid Index. It is far behind Apple (AAPL) (which carries a 5.42% weight in the index) and Microsoft (MSFT) (5.75%) and still has room to catch up with Google’s (GOOG) 3.97% weighting, but it is on par with Metaverse’s (formally Facebook) (FB) index weight of 1.78%.

Tesla’s strong performance has landed it among the top five contributors to return in five of the past eight quarters. Prior to the first quarter of 2020, Tesla had a minuscule impact on the broader market’s returns. But as the stock has rallied and was added to market indexes, its influence has grown.

Another way to look at Tesla’s impact is to see what returns would look like without Tesla in the mix. Consumer cyclicals are up 95.24% over the past two years. By excluding Tesla, the sector would be up 67.55%. By way of contrast, were excluded, the sector would still be up 87.5%.


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Tesla Inc147.05 USD-1.92Rating

About Author

Lauren Solberg  is a data journalist at Morningstar

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures